Will a split Android market doom the OS?

Antonio Rodriguez, a successful serial entrepreneur and now a VC, is very pessimistic about the future of Android.

In this post titled: Android as we know it will die in the next two years and what it means for you, he argues that the splintering of the Android market into many different versions will create an unsupportable multitude of operating systems and mobile hardware that will doom the operating system.

I used to think that, as with Linux and web services in the early part of last decade, Android was going to be the mortar for the internet of post PC devices…

…three events in 2011 burned it and we’re now holding on to a charred corpse that is quite different: an Android so splintered that it will make the glass on your Galaxy Nexus S2 Prime Pie dropped on concrete look like an ice skating rink.

The three events are: Google buying Motorola and thereby competing directly with all the handset manufacturers; Microsoft is able to get IP licensing fees from Android handset makers; and Kindle — a forked version of Android.

He says that the splintering of Android into many different versions will make it very difficult for developers to support them and that this will eventually kill Android, or at least kill the dream of Android becoming the “mortar” for the coming world of post-PC devices.

In many ways we’ve been here before: the development of Android is following a similar path to the development of Unix in the 1990s and the constantly failing struggle against fragmentation, and the consortia developing standard versions of Unix. And the reason Unix standardization efforts kept failing for so many years was because there were many companies which profited from the existence of a fractured computer market.

The problem with standards is that they make it easier for a large company to dominate a market because scale matters, whereas fragmented markets help defend the status quo.

Android is going to face the same issues, the same political and competitive obstacles that Unix, and other standardization efforts have faced in other markets — fragmentation is an important objective for established companies. For example, Rodriguez notes a conversation he had a year ago with the product head at a large US telco, “He told me that their ideal world was ‘5-10 platforms with 10-20% each.'”

A splintered mobile handset world is great protection for incumbents. Take a look at what happened in PC markets where the single standards of Intel microprocessor technology, and Microsoft operating systems, sucked out the vast majority of the profits in that market. Intel and Microsoft maintain operating profit margins in the 60% and above level, while PC makers have to contend with razor-thin profit margins in the mid-single digits. That’s why the US telco wants a splintered, fragmented market so it won’t be commoditised by a duopoly such as Intel/Microsoft.

That’s why mobile carriers have consistently rejected Intel and Microsoft’s efforts to standardize their industry — to avoid what happened in PC markets, to avoid becoming dumb bit carriers trying to survive on razor-thin margins.

This is why you can expect to see lots more splintering in the Android world. But Android won’t die in two years time. That’s because it has a vital role in maintaining a fractured mobile market.

For example, Intel is desperately trying to oust the ARM microprocessor architecture in mobile markets and the common wisdom is that this is a battle where ARM technology is simply better than Intel’s and that all that Intel needs to do is make its Atom microprocessors more competitive on power consumption, etc.

But even if Atom were to be technically superior and cheaper than ARM, Intel would still likely fail simply because Atom fails the competitive strategy test of its potential customers. They are well aware of the lessons of the PC market: that standards benefit larger companies allowing them to aggregate the profits of the market as a whole, while fragmented markets support larger numbers of companies and protect their profit margins. The status quo always reacts in ways that protect itself.

And as we know from many examples in history, the status quo is notoriously difficult to change because there are so many with a common interest in protecting it that it seems as if they act in collusion. That group dynamic is very difficult to overturn.

Android won’t die because it has found its role: to protect the diversity of mobile markets by making it easier to fragment those markets.

After all, you can’t fragment the iOS market because Apple owns that, similarly for the other OSes. But with Android as an open source project, you can fork off many times, creating ever more fragmentation.